Spat Over Phone Bill Audit Boils Over in L.A.

LOS ANGELES (CN) – Los Angeles refused to pay $11.6 million for a forensic audit of billings by AT&T, Sprint and Verizon and didn’t recover potential damages of $56 million from the carriers for overcharges, the auditor claims in state court. Communications Brokers & Consultants says in a 21-page complaint filed on Tuesday that delays, interference, political infighting, lack of cooperation between officials and departments, and the 2013 mayoral race contributed to the city’s inertia and failure to act on the audit’s findings. The telecommunications and overcharge auditor, doing business as Cost/Benefit Corporation, says it was contracted in September 2011 to look at seven years of wireless phone records in 36 city departments after it discovered the carriers were overbilling the city by roughly $1.2 million a year. According to the lawsuit, LA hired the auditor after then-mayor Antonio Villaraigosa was concerned that the city’s wireless rates could “turn into a scandal,” and an internal audit revealed that the city could save $1 million a year by reforming its cellphone use. The auditor says it finished the audit “except to the extent such performance was excused or rendered impossible by virtue of the city, including the city’s failure to seek recovery of sums of up to $56 million based upon the ?ndings of the audit presented to, and unconditionally accepted by, the city.” Mayor Eric Garcetti’s office did not immediately comment on Wednesday. Los Angeles City Attorney spokesman Rob Wilcox said the complaint is without merit. “In fact, it is CBC that did not fulfill their obligations and damaged the city and we will countersue,” Wilcox wrote in an email, abbreviating Cost/Benefit Corporation. The auditor’s attorney James Cooper told Courthouse News that it was a “shock” that the city had “dropped the ball” and is still contracted with the wireless carriers, despite its losses. He said in a telephone interview that he suspected the city is motivated by “political concerns.” “You know, a lot of people are getting money from these carriers – the very carriers they’re being asked to look into. There were circumstances where certain powerful people in the city did not want to move forward, even though we provided them with a substantial amount of evidence that these carriers were dramatically – and still are – overcharging the city in numerous ways,” said Cooper, a partner with Sherman Oaks firm Levinson Arshonsky & Kurtz. “The city is just hugely overpaying. They’re entitled to a lot of benefits under these contracts and they’re not getting them,” Cooper said, adding that it’s a “shame that the city has refused to do the right thing to save taxpayers’ money.” Back in January 2013, then-city controller Wendy Greuel said she would subpoena AT&T, Sprint and Verizon after they refused to hand over city billing records. At that time, Greuel was a candidate in the mayoral race – which she lost to Garcetti later that year. According to the auditor’s breach of contract lawsuit, Greuel’s investigation was undermined by Assistant City Attorney Laurel Lightner, who failed to issue a subpoena to Verizon and eventually told the auditor that nothing was going to happen until Garcetti took office. The company initially faced opposition in the summer of 2012 from department heads who were reluctant to allow auditors to look at records because they were “under the impression that this was another ‘witch hunt’ by the controller’s office as an attack on the departments’ management ability,” the lawsuit says. “Another frequent comment was words to the effect of, ‘We don’t want to be part of the controller’s headlines,'” the lawsuit states. Even when the departments began to cooperate, the auditor says it completed its report with “very limited assistance from the city” and faced further delays after its audit report was turned over to the city attorney’s office in September 2013. Despite presenting its findings to the city, the auditor says officials were less interested in the findings of the report and more worried that the auditor’s former employee Richard Knudsen was in possession of confidential city phone records – including those of the Los Angeles Police Department and the Department of Water and Power. Knudsen was fired in August 2013, the lawsuit states, but said he would hand over the records to the city if he was asked. The city never pursued the records, and the auditor says that it gave the city all documentation relating to its former employee. Cooper declined to comment on Knudsen’s official position at the company or the nature of the records that were in his possession. The auditor sent a letter on Aug. 29, 2014 to Mayor Garcetti stating that AT&T, Sprint and Verizon had overbilled the city by roughly $12 million and adding that the amount could rise to $17 million with other costs, according to the suit. Garcetti ignored the letter, the auditor says. Former City Attorney Carmen Trutanich had estimated that damages under California’s business and professions code “might add an additional $39 million or more in potential liability,” the letter stated, according to the lawsuit. It says the company warned Feuer in writing that the city had taken no action to prevent the carriers from continuing to overcharge the city. Every day of inaction meant the city was losing its chance to recover “‘another day of over-payments,'” under the statute of limitations. That letter was also ignored, the auditor says. “At least one of the carriers invited a demand and promised a settlement,” the lawsuit adds in a footnote. The auditor says it spent months and thousands of hours investigating the wireless carriers’ bills and creating the audit report. When it billed the city on August 15, 2014, the city refused to pay and denied a request to settle the dispute out of court, the auditor says. Cost/Benefit seeks contract damages of $11,628,103.